Investec first-half earnings down 15%

2012-11-15 12:00

Johannesburg - Investec [JSE:INL] on Thursday reported a 15% decline in headline earnings per share (Heps) to 15.9 pence for the six months ended September 2012 from 18.7p a year ago.

Adjusted earnings per share before goodwill‚ acquired intangibles and non-operating items decreased 4.4% from 20.6 pence to 19.7 pence.

Its interim dividend was unchanged at 8p/share.

Its operating profit before goodwill‚ acquired intangibles‚ non-operating items‚ taxation and after non-controlling interests was 2.6% higher at £229.4m and adjusted earnings before goodwill‚ acquired intangibles and non-operating items grew 3.5% to £168.6 m.

The company said its South African business reported an increase in operating profit of 6.6% in rand terms, benefiting from growth in revenue and cost containment.

The Australian business returned to profitability as a result of a significant decline in impairments‚ but the UK business reported results marginally behind the prior period due to lower investment income.

The group's low-capital intensive asset and wealth management businesses were supported by continued net inflows‚ with these businesses accounting for 39.3% of the group's operating profit.

Overall results have been impacted by the depreciation of the average rand/sterling exchange rate of approximately 15% and low activity levels given the volatile economic environment‚ it noted.

The group said its recurring income as a percentage of total operating income amounted to 69.3% from 67.8%, and the credit loss charge as a percentage of average gross core loans and advances improved from 1.12% at end March 2012 to 0.85%.

Third party assets under management rose 2.8% to £99.5bn - an increase of 6.7% on a currency neutral basis.

Customer accounts (deposits) decreased 2.6% to £24.7bn - an increase of 2.3% on a currency neutral basis‚ while core loans and advances decreased 2.5% to £17.8bn - an increase of 2.5% on a currency neutral basis.

Looking ahead‚ the group said the financial system has started to show signs of increased stability‚ as the process of deleveraging slows down and the capital and liquidity structures of the major global banks continue to improve.

However‚ the volatile global economic environment and some unresolved macro risks remain a significant feature.

“Investec's business model has been substantially realigned and the focus going forward is to consolidate the gains made in its asset management business and broaden the distribution of the wealth management offering.

"The group will continue its focus on building on the progress made in clearing legacy issues and improving returns in its specialist banking business. Overall‚ Investec's balanced business model positions the group to adapt to an uncertain and changing environment and ensures it is well placed to benefit from an improvement in market conditions‚” it said.